The market sentiment has moved towards global confusion and uncertainty. Covid-19 has significantly hit all major markets, including cryptocurrency. Bitcoin has suffered the most due to its classification as a “risky asset”.
Professional and retail traders had to quickly respond to changing market conditions and hence sold BTC to get USD to maintain margin levels for other positions, accumulate undervalued assets, or cash-out in case of the emergency.
Uncertainty is the biggest threat that drives all markets down. If you take a look at the correlation chart below you can spot that by the end of February - beginning of March 2020, the interrelation between BTC and S&P 500, Nasdaq 100, Nikki 125, FTSE 100 was asymmetric. Currently, the correlation between almost all assets is around 1, which implies that all markets are moving in tandem for now.
For instance, the Bank of Japan increased its annual purchases of ETFs to $112 billion (almost twice). FED cut the key interest rate to 0% and is going to put $700 billion in assets over the coming months with no limit. As it was called, a coronavirus QE package of $820 billion from ECB is incoming. Indeed, these are typical and ordinary emergency actions. It is more likely that some of the EU countries will have to put their economies into austerity after Covid-19 is over.
What is going to happen with the cryptocurrency market?
Well, nobody can say for sure. However, the supply of only 21,000,000 BTC (currently 17,754,100) and growing demand mathematics suggest further price appreciation.
Of course, this is a topic of much debate but it is up to you to decide. From the “risk asset” perspective, BTC is currently significantly undervalued and hence can be considered in a part of the “buying the dip’’ strategy in times of uncertainty and high volatility. Proper risk management with an optimized asset allocation and selection is a must.
As QE and other monetary policy measures are coming to ease the market bearish pressure, in such case a sideways trend formation is very likely to emerge. Prepare yourself and consider using Bitsgap’s GRID bot to maximize your return in the sideways market.
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